World's Second And Third Largest Economies To Bypass Dollar, Engage In Direct Currency Trade

To all who still think that in the war of attrition between the USD and the EUR (because contrary to what some have "discovered" only recently, currency wars have been going on for a long, long time and will continue to do so, before morphing into trade and real wars), in which both currencies are doomed, and where the winner takes it all, if only for a few minutes, we bring to your attention the following most recent update out of the Pacific Rim (where incidentally the Shanghai Composite has resumed its relentless track lower with the obvious intention of closing 2011 at its 52 week low) in which we find i) that the dollar's hegemonic control over the world is ending, and ii) that the mercantilist relationship so long sustained between China and the US, may be shifting and reversing, and in its next metamorphosis will see Japan buying the bonds of... China (although probably not for long - see next post). As Bloomberg reports, "Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for the exchange, to cut costs for companies, the Japanese government said. Japan will also apply to buy Chinese bonds next year, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday." And before someone blows it off as merely more foreign relations posturing, "“Given the huge size of the trade volume between the Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd." As for China's reverse mercantilist move, one which will stun anyone who believes that Yuan is still undervalued, "Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would be beneficial for Japan because it would help reveal more information about financial markets in China, the world’s largest holder of foreign currency reserves." Speaking of, has Albert Edwards gloated yet that given enough time, he always ends up being proven right, in this case about the CNY's upcoming devaluation?

Some more on the direct FX bypass, something which should piss of USD traders quite a bit, from Bloomberg:

Encouraging direct yen-yuan trades will aim to reduce currency risks and trading costs, Japan’s government said. Currently, about 60 percent of trade transactions between the two nations are settled in dollars, according to Japan’s Finance Ministry. China is Japan’s biggest trading partner.

Then-finance minister Noda said in September 2010 that Japan should be able to invest in China’s market given that China buys Japanese debt. Japan holds $1.3 trillion of foreign- currency reserves, the world’s second largest.

Austria has already been granted the eligibility to buy Chinese bonds, according to the Japanese government official. Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore.

So while the US and Europe bicker over just who it is that will first end up bailing out one then the other, those who are supposedly doing the bailing, have decided to gradually move away from the interminable financial sink hole that is the developed world. All that needs to happen next is for Russia and India to join this compact, and Jim O'Neill will be proven 'right', although with a 100% inverse outcome to the one desired by the Goldmanite, as globalization proceeds merrily on its way... just without the US and Europe.

Blame the Baby-Boomers for all the ongoing disgraces of this country, that's why they are considered America's failed generation. These good-for-nothing invested their deprived intellect in experimenting with all types of drugs and having very promiscuous (and many times deviant/unnatural) sexual lives.

In fact, the following video taken at Woodstock in 1969 clearly depicts what Baby-Boomers were all about:

Consequently, their offspring are the best evidence that defect genes have been transmitted from one generation to the next; worst of all, the chances that their descendants' DNA carrying a more complex sequence of these defective genes are 100% guarantee -these new generation of Americans can fairly be described as subhumans.

Santana was great! As for the blame, think of it this way, the baby boomers paid for the silent generation’s retirement and medical bills, and will get nothing in return. Any boomer after 1950 is toast.

If you want to blame a generation blame the silent generation, they are the gimme generation who never saw a government program that they could resist. They were the ones who foisted the generational theft upon us.

Didn't we see the EXACT same post two days ago? The blame is on ALL Americans for allowing the banksters and their minions to absolutely destroy this country.

Have you EVER shopped for cheap Chinese crap at Walmart? Have you resisted paying taxes? Have you EVER written your representatives (although I use that term lightly)? Have you ever spoke the truth about 911 to friends and family?

Just what have YOU done? All I see is a repeated post by a young UNEXPERIENCED kid who has NO clue about the big picture.

Bob, though if you look beyond the broad brush and his purposefully denigrating tone, what he is saying is somethign that needs paying attention to.

Probably not too many ZHers fall under the ambit of what he is saying but boy, a lot of Americans do.

It's two things really or three.

1) With leadership comes responsibility. Amercia has shown none and neither have the boomers.

2) Boomers got assimilated. Totally. I lived in Marin county, north of the bridge in NorCal. I saw it, everywhere. Stinking rich, sold out boomers in their fancy cars and their tie-dye and multi-million dollar homes.

3) Woodstock was a CIA op. Specifically a drug op. It was a horror story through and through, in-spite of the glanourization. Wavy Gravy was a CIA payroll drug dealer. A motorcycle gang was in charge of security!!!!

So, blame and finger-pointing aside, people in the US seem guilty by sins of omission or commission. True to a greater or lesser degree worldwide, but then again not too many countries have fought or instigated so many wars, dropped nuclear bombs, poisoned their own population AND dumbed them down...

If you are going to assign responsibility to someone then they must also have had the authority to have made a change. Individually, other than POSSIBLY an elected official, that is not the case. Our system of gov't gives the illusion that we all have a "vote" in who represents us but they fail to mention the representatives are purchased and vote completely against the best interests of the voters who put them there. Doesn't take much observation to see this is the case. So, I completely disagree with your assessment that "baby boomers" were anything other than snookered into believing they were being fairly represented. I might also go for the idea they believe there is a free lunch, but they were firmly led down that road as well starting in 1913.

I can't disagree with you more. The reason the entire world is in the toilet and being flushed, is because of the excuses, lack of initiative or responsibility, and the projection of responsibility onto someone else. When the going's good though, everyone and their mother want the positive credit. But when things are deteriorating, it's always someone else's resonsibility. You're ignoring a major point, everyone has justified self-seeking in the biggest con of them all, self-reliance, so none of the elected representatives are concerned for other's welfare, most by intention, some by simple mindedness.

My recommendation, do not rely on someone else to fix something for you. In this world of greed and self, no one gives a crap about you or anyone other than the self. Fix it yourself or watch as things get much worse.

Well, you seem to know about the problems of our country but I notice they are not fixed. Since you claim that each individual is responsible for the state of the world, nation or city, why is it that you have been unable to fix what you see is wrong within any of these systems? I say it is because you don't have the power/authority to do so. You may be able to control some things within your immediate sphere of influence but you have not fixed what we are talking about here. I can only implore my representatives to do the right thing, I can't make them do so. I take my own initiative to protect my family as best I can given the laws I'm forced to follow or the limits of my income, time, energy. Other than that, I'm not sure I follow what I am able to do that I'm not doing? I don't see much being fixed regardless of my desire to see them fixed and my pleading with my representatives to do so? Please advise how I should be going about fixing the world?

I have been doing my part all of my life. The problem is, the vast majority have not been, and in most cases, working against my progress. I did not say an individual can overcome the majority, I said we all need to be concerned citizens. By the way, the US is not the only country with problems by any means, the whole world is buried in cultures that are the root of the problems. I think the whole world needs a do-over. And the only place to look is in the mirror. Start doing something and hope others catch on.

Well, I can agree with everything you say. I've been doing the same. But when someone accuses me, as a member of a demographic group, of ignoring/encouraging the excesses and problems of the world, and I know I've been fairly proactive in trying to stop the activity he is accusing me of encouraging, I get defensive and call bullshit. Lumping everyone of a certain age range and making generalized statements is idiotic and I refuse to let someone get away with that nonsense. I agree with your comments, excluding the language which implied that you agree with the idea that all baby boomers somehow "let or encouraged" the leadership of this nation do any fucking thing. These asshats have been on autopilot for decades and pretty much do what they want regardless of what you and I ask them to do or who we vote for. I'm hoping Ron Paul can at least get some Executive Orders repealed and be around long enough to give decent, informed input when this current monetary system comes crashing down. Other than that, we are off the cliff and busy enjoying the view.

What he is saying is that hundreds of millions of innocent people deserve what is happening to them because they can't or won't understand a conspiracy that is designed to go undetected. I'm sorry, I can't go along with that.

I'm no more greedy for buying an SUV than my parents were for buying that loaded station wagon.

The same goes for a larger house when my parents owned a beach house. How many people do you know who one one of those bad boys today?

I'm no more greedy than my parents for taking a vacation like them.

Hello, I'm Joe Six pack. I work longer hours, commute further, limited myself to two kids, and my wife works too.

Anyone who says the average guy, who really has all the votes, is in anyway morally responsible for the most powerful and unseen conspiracy in the history of the world has to reconsider how he views reality. The central banking conspiracy works like the roots of a tree slowly cracking a sidewalk. A normal person can't see it and doesn't have the time or the werewithal to learn the truth.

Although your avatar makes me throw up in my mouth, I agree with your comment.

I have been ostracized from the supposed aristocracy of my community for being too vocal about 9/11, the banking cartel, and the imminent doom of the great unwind.

For every one person that I reach, it is worth 30 people giggling about what a tinfoil "twoofer" I am. At this point I enjoy being mocked for fighting for the truth. I feel much more fulfilled than when my life was consumed with possessions and meaningless materialistic bullshit.

Big D... It doesn't matter what people think any more. Scream it out. I did it to the most senior man at my facility last week. It started with a news clip about a soldier coming home to his two year old daughter. Touching..... yes, but it's the same ol-thing. "BE A SOLDIER - BE A HERO". Bullshit.......it should be "BE A SOLDIER - BE A PAWN, MURDERER, COUNTRY DESTROYER, AGENT FOR THE BANKERS......"

This gentleman's father was career military and he didn't take my statement lightly. (I was stupid enough to serve also, so my statements had some backing.) I let loose about 911 and how anyone who still believes the "official" story is a brainwashed sheeple dumb-ass. (He, like most folks believe what comes out of that damn boob tube). The barrage continued..... if you know the truth about 911, then you understand that EVERYTHING after that is a LIE. Iraq, Afghanistan, Pakistan, Syria....and ALL the rest of the counties we've fucked up. THE MILLIONS OF PEOPLE WE'VE MURDERED.

Homeland Security, Patriot Act, this last piece of crap NDAA....are ALL acts to TAKE YOUR FREEDOMS AWAY.

I explained to him the facts on Iran, a country who has not attacked anyone in over 200 years. I told this gentleman that we WILL do it. We will murder millions more. We will destroy another country.We will start WWIII to cover the bankers asses.

I THEN explained what has to be done to "right this ship". That there is no other options. (I can't say it here on ZH, but many are understanding the need). At that point....he left.

To the people who DO understand. Speak the truth to family and friends, co-workers, people on the street.... This nightmare must end. The power is with the people, USE IT.

My statements towards military members was too harsh. Nobody joins the military with the intentions of doing what I mentioned above. You join with the thought of serving your country and being the "good guy", but once you sign on that dotted line and lift your right hand.......you're THEIRS. You no longer have any control over you own life and you will be USED at the whim of tyrants.

How many military members are "protecting" the USA? How many are overseas "fighting terrorism'? Just what IS fighting terrorism? Is an insurgent an enemy? Maybe an insurgent is a citizen of a country who is fighting off an invader. So's who's the invader in all these cases?

As my good buddy Henry (Zionist piece of shit) Kissinger said...Military men are dumb, stupid animals to be used as pawns for foreign policy.

Please understand I mean NO disrespect to any military member, just understand what you're being USED for.

Seems like WL is a bot. I say that because his posts tend to be at the very top of threads, indicating a high rate of page refreshing, and those posts are seldom relevant to the topic at hand. What's a shame is that we respond, allowing "him" to sidetrack the discussion.

Let's say you're another country and you bought into the whole globalism thing and you were doing pretty good making stuff and selling it all over the world. Then the cover came off and the box opened and voila... you saw your so called trading partners coming unglued because your business model really did work, you put them out of business and you would be going down with them very soon. Holy shit! Those aren't trading partners, they're anchors around your neck. So you look around for someone, anyone to work with to help you bail yourself out.

It's all natural ebb and flow. Every man for himself. While the American tax payer gets it shoved up his collective ass the sheeple continue to graze. Oblivious to the wolves coming up the hill.

We have the wolf by the ears, and we can neither hold him, nor safely let him go. Justice is in one scale, and self-preservation in the other.”

-- Thomas Jefferson

“We all know, from what we experience with and within ourselves, that our conscious acts spring from our desires and our fears. Intuition tells us that that is true also of our fellows and of the higher animals. We all try to escape pain and death, while we seek what is pleasant. We are all ruled in what we do by impulses; and these impulses are so organised that our actions in general serve for our self preservation and that of the race. Hunger, love, pain, fear are some of those inner forces which rule the individual's instinct for self preservation. At the same time, as social beings, we are moved in the relations with our fellow beings by such feelings as sympathy, pride, hate, need for power, pity, and so on. All these primary impulses, not easi ly described in words, are the springs of man's actions. All such action would cease if those powerful elemental forces were to cease stirring within us. Though our conduct seems so very different from that of the higher animals, the primary instincts are much aloke in them and in us. The most evident difference springs from the important part which is played in man by a relatively strong power of imagination and by the capacity to think, aided as it is by language and other symbolical devices. Thought is the organising factor in man, intersected between the causal primary instincts and the resulting actions. In that way imagination and intelligence enter into our existence in the part of servants of the primary instincts. But their intervention makes our acts to serve ever less merely the immediate claims of our instincts.”

Let's say you're another country and you bought into the whole globalism thing and you were doing pretty good making stuff and selling it all over the world. Then the cover came off and the box opened and voila... you saw your so called trading partners coming unglued because your business model really did work, you put them out of business and you would be going down with them very soon.

In past year or so China has entered into bi-lateral trade agreements with Russia (resources, energy), Iran (oil) and now Japan (technology) where the respective currency pairs are what the trade is denominated in, bypassing the US$.

BRICS-China's preferred plan is failing, which is to offer the IMF a large contribution in exchange for a higher quota. I posted this yesterday http://i42.tinypic.com/23gy77n.png Clearly America doesn't want to give up its veto power—the result—no BRICS' loans, more printing and huge price swings in USD/EUR, which is what 'really' caused the 2008 crises to spill over into emerging economies.

The BRICS (China) has had enough—Plan-B is to stabilize the yuan and gold as an anchor (peg) for currencies within the OCR (Optimum Currency Region). They will not unpeg the yuan unless there are major currency swings that emerging economies can not handle, but are betting that the Fed and ECB will flinch first (via FX intervention) if the USD goes above 82.

China is ready to purge its bubbles in order to restore equilibrium within the OCR. This is a political move that is not possible in America because you have gridlock amongst dems and reps. China doesn't have any political theater, rather a dozen men sit a table and impose monetary policy just like that.

I believe things will get so bad that investors will gravitate towards a monetary system (even ruled by communism) that still has integrity, rules and authoritative control. This isn't America's choice anymore, the world is ditchin' the dollar so prepare accordingly.

I'm here because I thought I was going on a date and we were meeting at zerohedge.com. Drinks are stiff and reasonable and the service is great. Date never showed but I'm hopin...seems good a place to meet Little Miss Hater+twins 011010 and 011011.

ww3 has officially started. hatoyama's manifesto is in place. the japanese have officially hitched it's wagon to china at the expense of the now carriageless horses of the usa. the japanese dream of a greater east asia properity sphere is about to be realized. this is an incredibly dangerous time if you live in the usa. the flailings of a failing empire are usually not citizen friendly. the usa will do something incredibly more stupid than what it has done in the last decade that will upend the geopoliticaleconomic world and deliver it directly to asia. india must see it has to chose east or west now and would be stupid to side with the usa in the weakening state it is in on the other side of the globe. the question is really whether asia has the critical mass to let the western nations devolve into third world morasses ,as the asians had been for much of the 20th century by western design, permanently crippling western political/economic influence in the region. the world will suffer mightily and asia will arise from the heap just as the usa did in 1945 only asia will not have a russia to contend with.

i can tell it is junk time. you can join the brits who are still singing, rule britannia, britannia rule the waves.

China needs to create its own yuan bond market to crowd out the USD debt, and seems to have found its first bagholder already. All other stock, RE and commodity bubbles will be crashed and inflation statistics forged for it to happen. All the noise about the gold standard, various banana republics adopting yuan reserves is secondary until then.

This agreement just enables Japan to manage their currency vis-a-vis a trading partner that has been buying JGBs in size. This is more telling of how much China needs a helping hand to deal with implosion right now.

Let's imagine that as of midnight today oil was not priced in dollars, and OPEC suddenly went offside versus USA hegemony and if the price of oil to the USA suddenly spiked by 20%...

This move by China and Japan needs careful consideration, at some stage china needs rid of it's useless USA paper, at another stage (inside next twenty years?) china will need twice the oil it does now.

At what stage does the USA ptp realise that a tipping point has been reached, foreign crusades to steal resources isn't worth it?

Fascinating, but IMO the geopolitics are more complex than the above comments suggest. Not long ago, China was balking at Japanese ocean drilling. Japan has been practically a U.S. colony since WW2. After Fukushima, lots of U.S. troops pulled out. Did they return in the same numbers? Would Japan really dare to defy U.S. wishes regarding dollar reserve currency status and trade practices?

What is really going on here? Japan is switching teams? If so, this is a major event. Or is it being done with U.S. blessings under some other rubric?

I find this news and many of the comments amusing as I am unsure as to why one would want to buy Chinese bonds given the whole raft of problems they have, including deferral of interest payments. Perhaps it is time everyone stayed at home and simply traded goods and services on a balanced as possible basis.

Borsch Shit was was the poopy that got Berlin and Dresden Fire bombed. Iraq's planned Oil Borsch was the reason we jolly green genocided through Iraq - thank god those contractors are still there, about 250,000 of `em (mercs and merc support), paid for by you guessed it, by our very famous Auntie Sam's State Department (6 generations of american kids will have to give a lot of blow jobs in the K Street Kiddie Brothels to pay that bill 4-Sure) to instagate unjust cause for more of the same to eternally continued militiary industrial complexing under guise as guarding the state departments 600,000,000$ Palacial Embassy (makes Saddam's palace look like a squatter's camp).

and fuku, the generation aging gap and the debt tsnami change nothing in Jap conception of world? Are they that backward looking and brain washed? Somebody must be looking ahead and doing some foreward thinking in sushi land?

Japan just moved 1,000 miles closer to China and 1,000 miles further way from the USA. Remember that Japan supposedly does not have any nuclear weapons. China does and has the throw capacity to hit Japan. IMO this is a capitulation on the part of the Japanese to be more closely aligned to China, which is one of its traditional foes.

IMO this is an historic mile marker in geopolitics. Watch for further erosion in relations with the USA. Japan does not see its future advanced or even protected by the USA. That should be a very sobering consideration.

Everyone here (well the thinking employees of Tokyo Disneyland anyway)is still very much afraid of Nanking payback and rightfully so, though no one will admit it. They might cozy up for a little but they can't see that far into the future, look at Fukushima. Last I heard is they're going to cover it with giant snails and let nature take it's course.

Japan, which since 2008 has had a revolving door of finance ministers who have either committed suicide or resigned after a very short term, undoubtedly because they realize the hopeless budget position of Japan as described by Kyle Bass who calls it one of the most obvious but ignored situations he's ever seen, is going to be toast in 2012 or 2013. So this attempt to "ally" with China is a desperate grasp at a life preserver. But China won't be there to bail them out as they simple cannot be bailed out. Their situation is absolutely hopeless. Besides, the Chinese are beginning to have their own major problems which will only increase as their exports tank after the pending EU deep recession/depression in 2012 followed by similar problems in the US brought about by the EU problems.

If the conspiracy theories are correct, than the Elite will succeed in having a one world currency backed by gold and silver. All other currencies will be defeated. China is no match for the Elite who control the world financial systems. In one day they can destroy the Chinese economy. The problem with this one world currency is not that it will be a one world currency, but what this currency will be. It won't be bills or coins. It will be completely electronic. And it will be in the form of an implantable RFID chip. We won't be able to buy or sell without it since it will be the only way we will be allowed to buy or sell. No yuan, no euro, no yen, no pesos, no dollars. Just the one world electronic currency backed by gold and silver. Problem is that this is how they will try to control all of us. You could be a multi-millionaire. If you get out of hand, they will turn your RFID chip off and you would become homeless, begging for food. And if you get sick, don't bother going to the doctors because access to all your medical records will become inaccessable. Just a couple freightening examples of how they would have complete control over all of us if this conspiracy theory proves correct. (Right now it appears that they are pushing to have all medical records digitized so they can put it on an implantable RFID chip.) They will have complete access and control over our banking accounts, medical records, etc. And just for kicks, they will fit these chips with GPS, so they will not only know everything we buy, how much money we have, what our medical conditions are, what books we take out of the library, but also, they will know where we are at all times. So if a crime is commited, our chip will indicate that we were there at the time the crime was commited. If a warrent for our arrest is issued, a few hours later we will be in jail. You see, anything that can be digitized (put on a computor), can be put on this chip. It all sounds freightening and like science fiction doesn't it? Sort of like George Orwells 1984? But before you hit that down arrow, just remember that this concept is possible. The technology is here, it just has to be implimented. You don't have to believe this conspiracy theory, you just have to keep it in mind. I do. And if I were able to talk to Alex Jones or Lindsey Williams, I would ask them to ask their contacts if this is what the ultimate plan is. I know Lindsey Williams doesn't know this yet. But I don't think he ever asked his elite contacts this. But at his age, he shouldn't. I don't think his heart could handle the answer they give him.